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Post-mortem studies suggest that GABAergic neurotransmission is impaired in schizophrenia. However, it remains unclear if these changes occur early during development and how they impact overall network activity. To investigate this, we used a mouse model of prenatal infection with the viral mimic, polyriboinosinic-polyribocytidilic acid (poly I:C), a model based on epidemiological evidence that an immune challenge during pregnancy increases the prevalence of schizophrenia in the offspring. We found that prenatal infection reduced the density of parvalbumin- but not somatostatin-positive interneurons in the CA1 area of the hippocampus and strongly reduced the strength of inhibition early during postnatal development. Furthermore, using an intact hippocampal preparation in vitro, we found reduced theta oscillation generated in the CA1 area. Taken together, these results suggest that redistribution in excitatory and inhibitory transmission locally in the CA1 is associated with a significant alteration in network function. Furthermore, given the role of theta rhythm in memory, our results demonstrate how a risk factor for schizophrenia can affect network function early in development that could contribute to cognitive deficits observed later in the disease. [ABSTRACT FROM AUTHOR]